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America's in debt denial

The road to financial ruin is paved with plastic.

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More than ever before Americans are racing along this highway to hell -- saving less than ever, draining cash from home equity and continuing their unrelenting pursuit of the good life.

They're carrying a mountain of consumer debt, comprising bank and department store credit cards and those "easy-to-get, everybody-rides" auto loans. Americans can't seem to get enough of them.

It's an addiction and, like all addictions, those who are hooked are in denial -- debt denial.

As a result, we're in it up our eyeballs; more than $2.15 trillion as of August 2005, according to the Federal Reserve. All those zeroes translate to nearly $7,700 for every man, woman and child in the United States.

What's more, it's been increasing steadily by billions every year: $1.7 trillion in 2000, $1.84 trillion in 2001, $1.92 trillion in 2002, $2.01 trillion in 2003 and $2.1 trillion in 2004.

Could it be that as a nation we have a lot to learn about personal finance?

In 2004, Bankrate's Financial Literacy Survey showed America earned a grade of "D" in financial literacy.

The statistically valid survey of 1,000 Americans conducted for Bankrate by RoperASW, revealed that a wide gap between what we know we need to do for our financial well-being and what we actually do.

For example, 71 percent said that keeping an emergency fund is "very important," but just 44 percent said they have one. That's a gap of 27 points.

And most said they are worried about the amount of credit card debt in this country but insist that, personally, they don't have a problem. Only a minority of Americans confess to having a problem managing their credit. For example:

  • 75 percent say they don't make major purchases on their credit card unless they can pay it off immediately.
  • 69 percent said they don't put any charges on their credit card that they would not pay off right away.

Which raises this question: Where is all that credit card debt coming from?

Do you have a problem? Are you making good spending choices or are you in denial? To find out if you are in control of your spending, consider these questions:

  • Do you know how much you owe?
  • If you had to estimate the balance on each of your credit cards right now, could you come close?
  • Do you know how much you're paying in interest on your credit cards? Or are you shocked every time the mailman brings you a credit card bill?

If you're not sure where you stand, you can get a quick reality check using Bankrate's credit card calculators. One shows the true cost of paying the minimum, and another computes what it will take to pay off your credit card.


Bankrate.com's corrections policy
-- Posted: Nov. 1, 2005

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